Policymakers must go much further than ring-fencing the retail and investment operations of British banks.
That is according to a new report published today (21 December) by the Parliamentary Commission on Banking Standards (PCBS), which has called on the government to implement more stringent regulations than simply forcing financiers to separate these areas of their business.
The PCBS believes this proposal falls "well short of what is required" in the aftermath of the global economic crisis and urged the Conservative-Liberal Democrat alliance to "electrify" the fence built around banks so lenders cannot pick their way through it.
Andrew Tyrie, chairman of the Treasury Select Committee, feels that the reforms in the current Financial Services Bill are too weak and said regulators should be afforded power to enforce these changes.
"For the ring-fence to succeed, banks need to be discouraged from gaming the rules. All history tells us they will do this unless incentivised not to," he noted.
By Gary Cooper